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After throwing in the towel on what in the early nineties was a sunset industry -- timber and wood processing -- Crown Asia Chemicals' luck turned the corner when it switched to chemical compounding and plastic tube pipe (polyvinyl chloride - PVC) manufacturing. Geared to the construction business, Crown's major products - PVC and plastics-based chemicals, produced net profits that may be small until last year, growth of 30% to Php65m, but enough inspiration for the company's getting into high-tech pipe manufacturing and bagging some PVC supply contracts for PPP projects like the NAIA Expressway and with a still undisclosed housing developer. Its most recent breakthrough was unlikely of a small family-owned company: doing an IPO.

PSEi fell 0.23% to 7,532.52 last week despite slowing inflation as foreign selling continued to weigh in. The market continued to register net foreign outflows for the past five weeks for an aggregate amount of Php8.71bn (July 6-Aug 7). Also, the market recorded fourteen weeks of net foreign selling out of fifteen since April 27. Last week the market recorded a net foreign selling of Php319mn. Inflation in July was at 0.8%, the lowest in twenty years. This brought year-to-date inflation to 1.9%.

Local market players positioned ahead of the bond swap and release of July inflation figure. This led to lower yields across the board (- 8.5 bps, w-o-w). Trading depth was sustained at Php17.2bn, +4.3% w-o-w, an 8-wk high.

PSEi fell 1.51% last week to 7,550. Foreigners are still net sellers for the fourth straight week amounting to Php3.14bn, bringing the year-to-date foreign buying to Php7.82b (down from its high of Php49bn registered on April 10). Net foreign selling was recorded for the following issues: TEL (Php1.03Bn), SCC (Php646mn), SM (Php468mn), BDO (Php384mn) and ALI (Php352mn).

Trading volume up amid successful FXTN 05-72 (remaining 3 years to maturity) re-issue. We saw modest buying of the FXTN 05-72 in the secondary market. Average yield at auction was at 3.089% and its R2 rate fell to 3.0431% last Friday. Excluding FXTN 05-72, average trading was at Php11.9bn, up by 10% the week prior as local traders remained nervous on global uncertainties. Treasurer Tan reiterate that the bond exchange will take place prior to Fed's first rate hike.

PSEi closed flat to 7,665 last week (+0.64%). Foreigners are still net sellers amounting to Php1.8bn, bringing the year-to-date foreign buying to Php11.2b (down from its high of Php49bn registered on April 10). Net foreign selling was recorded for the following issues: SCC (Php558mn), GLO (Php527mn), BDO (Php345mn), URC (Php282mn) and ALI (Php277mn).

Trading volume was low amid short trading week and cautious local traders due to volatility abroad. There was also an absence of market-moving news at the domestic front. Late last week, Monetary Board Member Medalla said that inflation hitting below 1% will give room for the BSP to cut the reserve requirement ratio. Remember that raising the reserve requirement ratio (RRR) was the first facility used by the BSP to moderate liquidity growth in 2014. The BSP raised the RRR by 1% to 19% in April 2014).

PSEi rose 3.04% during the week to 7,617.13 on positive reception by the market on the Greek bailout deal. The Greek parliament approved the austerity bill needed for the approval of its bailout by the ECB. Huge gains were recorded by BLOOM (+10.47% to Php9.50/sh), TEL (+5.99% to Php2,936/sh), GLO (+5.78% to Php2,526/sh) and RLC (+5.56% to Php28.50/sh) which lifted the market after two weeks of drop.

Market activity was prominent at the front-end after t-bill traded volume hit Php4.4bn/day last week, highest since week of Jan 9, 2014. This put average daily trading volume to Php12.9bn, (+49%, w-o-w). Demand for t-bills was due to the combination of the following: 1) June inflation at 1.2%, 30 bps lower than expected; 2) uncertainties abroad triggering short duration strategy; and 3) lower yields at t-bill auction.

PSEi fell again for the second week to 7,392.59 (-1.89%) as the Chinese market slump continued to weigh down the region despite better local inflation results. Philippines recorded inflation slowing to 1.2% in June, bringing the first half rate to 2%. Meanwhile, the Shanghai Composite Index fell -31% from June 12 to July 8, 2015 despite the People's Bank of China's cutting its rate to stem the market fall and China Securities Regulatory Commission relaxing its requirement on margin trades (it will no longer require brokerages to force the sale of stock held by clients with insufficient collateral). After falling -2.28% from the previous week until Wednesday, PSEi was able to recover as Greece gave in to its creditors' demand in exchange for a bailout fund.

The stockmarket's banking sector is down -5.4% year-to-date (ytd). Thanks to the lone bank gainer Metrobank, up +12% ytd, the slump could have been much worse. MBT has weathered well the market rout while BDO and BPI's share price drops mounted at a cumulative -5.2% and BPI's -2.3%, respectively, ytd. MBT also had a lower decline from this year's peak of only -6% than the average of the listed 7 banks' dip of -16%. Brokers' "BUY" MBT recommendations have helped shore up prices, grounded mostly on a perceived pivot in the bank's strategy; the stepped up lending in 1Q15, signalling the bank may be shedding a bit of its conservative loan to deposit ratio of 61%.

Global money is flowing back to safe haven assets on two key developments, prompting a rally in German and Australian bonds, USD gains and losses in emerging stock markets. The PSEi closed lower, -80.15 pts down to 7,455.15 today. USD: Php45.127 is also lower by -7.8 centavos early today (July 6, 2015). Philippine peso bond trading volume was light with rates unmoved by low June inflation bet ahead of tomorrow's release, considered as a non-event with prediction already at the low end of 1.1%-1.5% of the BSP's 1.1%-2.0% range forecast below May's actual of 1.6% and April's 2.2% with ytd at 2.2%.

Macau gross gaming revenues dropped 36.2% in June year-on year to $2.18bn, the 13th straight month of decline and the lowest since November 2010 according to Gaming Inspection and Coordination Bureau (Macau). That the revenue drop is better than the median estimate of -38.3% might have been partly due to Macau government's easing up on the crackdown; say an announced reversal of the transit visa policy which starting July 1 allows frequent travels and longer stays for mainland China passport holders. (Longer stays of up to seven days in Macau from five days; second entry within 30 days rather than 60 days).

PSEi fell -1.14% to 7,535.30 during the week following the slump in Chinese markets and Greece defaulting on its $1.7bn loan from IMF. On a month-to-date basis, the index fell -0.21% while recording a net foreign outflow of Php11.6bn. This leaves the PSEi with a year-to-date net foreign buying of Php16bn, -67% down from its high of Php49bn recorded on April 10. Year-to-date, total value turnover amounted to Php1.21tn. Year-to-date gain is at 4.21% (highest recorded was on April 10, 2015:+12.4%).

Trading was weak due to uncertainties abroad. It seems that the low inflation view for the month of June (consensus at 1.5%) was already priced in by the market. Note that the market posted modest treasury gains at the front end the week prior (June 22-26) after the BSP said that inflation could hit within the 1.1 - 2% range. At the global front, the US reported that non-farm payrolls remained above the 200 K level. Wage growth and participation rate disappointed at 0% and 62.6%, respectively. These mixed numbers slightly lessen market confidence on a Sept Fed rate hike.

PSEi was flat during the week (+0.27% to 7,622.05). Foreign selling continued for the ninth week amounting to Php2.18bn last week (aggregate amount of Php44.58bn). Year-to-date, PSEi still registered a net foreign buying of Php16.41bn (from a high of Php49.8bn on April 6-10). Among the top stocks sold were SMC (-6.05% to Php60.55/sh), LTG (-3.02% to Php13.50/sh), BPI (-2.78% to Php96.00/sh), BLOOM (-2.44% to Php8.78/sh) and MEG (-1.40% to Php4.92/sh).

After hitting an all-time high of 8,127 in April 10, 2015, the PSEi declined to 7,323 (-9.9% from peak) last June 9, 2015 on disappointing 1Q2015 earnings growth (10%-14%) vs consensus expectations of mid-to-high teens. But the market never entered bear market territory defined as a 20% drop to 6,501 as we saw a two-day recovery to 7,504, up +2.5%. The local and external headwinds - the Fed liftoff, Grexit/default -- had thinned out YTD net foreign buying grossed to Php29bn from previously Php44bn as of end-1Q15.

We recommend a trading buy rating for CROWN with a target price of Php2.63/sh. We valued CROWN using discounted cash flow analysis with a WACC of 9.5%, EV/EBITDA multiple of 6-7x based on current levels of industrial companies and perpetuity growth model with a rate of 1-2%. At our income target of Php78mn for 2015, CROWN trades at 22x P/E. We valued CROWN as a stand alone company instead of comparing its multiples with peers as its size is hard to justify for comparison and most peer companies in the region trades at very high multiples.

PSEi snaps the five-week fall, up 1.3% during the week to 7,601.17 despite foreign selling persisting for the eighth week. The market was lifted by signals from the Federal Reserve that rate increase will be gradual. However, net foreign selling amounting to Php2.34bn was recorded. This slashed year-to-date foreign buying to Php18.95bn from a high of Php49.8bn (April 10).

Trading volume hit YTD low at Php6.6bn/day, down 66% w-o-w. This pulled down initial June trading volume at Php13.6bn, slightly higher than May average at Php12.7bn. Traders remained defensive as global yields rose on global sell-off. The Fed is also scheduled to hold its meeting this week. Yields rose by an average of 15 bps.

PSEi fell for the fifth week to 7,503.72 (-0.31%) as foreign selling continued for the seventh week. The market recorded foreign outflow amounting to Php21bn since April 27. This erased a big chunk of year-to-date net foreign buying from a high of Php49.8bn in April 10 to Php21.7bn last week.

Better-than-expected May inflation did trigger treasury gains as investors wait for the final April employment numbers from the United States. Inflation was at 1.6%, lower than April's 2.2%. After the Philippine inflation number was released, mild buying interest was only seen at the long-end.

PSEi fell 0.7% to 7,526 during the week as foreign selling continued for the sixth week. The market sank further for the fourth week as investors digest the lacklustre 1Q15 corporate earnings and disappointing GDP results. Top foreign buys last week were SMPH, GLO, ICT, LTG and MPI while biggest foreign selling were recorded on URC, ALI, AC, JGS and TEL. Globe continued to be the best performing on good 1Q15 earnings results (+25% core earnings growth amounting to Php4.2bn).

Philippine 1Q2015 GDP was at 5.2%, significantly lower than our 6.5% expectation and market expectation of 6.6%. The curve flattened by 7 bps on lower FY2015 GDP prospects. This triggered quick profit trading at the front-end. We saw more bids than offers for long-dated liquid securities last week. Week-on-week, benchmark yields rose by an average of 5 bps.

GDP growth coming in at a disappointing 5.2% vs consensus range of 6.5% - 6.8% is a sea change, hugely divergent from historical trends in the run-up to the past four election years. A major shift was the fiscal levers that don't seem to be working, with gov't spending crimped by the DAP and pork barrel scam. NEDA chief A. Balisacan though assured in a briefing this morning that pumppriming (thru the DPWH) picked up 11% since Feb to March and 33% until last April and will sustain in 2Q15 until yearend. The continued gov't underspending, while it reflects positively on the deficit, poses a risk on just how effectively govt could counter cyclical weakness elsewhere in the economy such as flat trade.

PH treasury market posted week-on-week gain after the Fed minutes indicated that most voting members did not consider a June hike last April meeting. Dovish members still dictated the result of the FOMC meeting. In terms of trading activity, daily volume remained at near Php13bn level indicating that the market was generally at the sideline.

Recommending a buy on dips for what looked like a fully valued Globe.This is on the view there will still be pockets of upsides created by each quarterly earnings season. The bet is mainly on the momentum of strong operating results continuing to pleasantly surprise and increased foreign interest with MSCI weight almost unchanged vs. PLDT's reduction.

DMCI Holdings Inc.'s (DMC)continuing menace that has damped share prices, (aside from its flat earnings of Php10.7bn in 2014), is the tall building construction project called "Torre de Manila," which is faced by a cease and desist order, but challenged by DMC in the High Court. DMC share prices have dropped -3.8% year-to-date, bucking the conglomerate sector's (in the PSEi) comparable rise of 14% in terms of total return (dividends included) even as its own 1Q15 earnings rose 15% to Php3.0bn in line with the profit guidance of Php13bn. Recall that a historical and cultural agency of the gov't has alleged the building completion would tend to ruin the Rizal Park skyline in Manila notwithstanding full compliance with permit requirements by the holding firm.

Trading remained low at Php13.4bn/day, 14% lower than the average daily trade in Jan-March 2015 (@Php16bn). The improvement in trading (+32.9%, w-o-w) was primarily due to some buying at the front-end middle of last week. Market players were quick to lock in gains after the central bank kept rates unchanged last May 14.

FGEN sees vast opportunities in the Luzon and Visayas peaking power market and is stepping up its capacity expansion geared to the so-called mid-merit market. The goal is to achieve the scale, large and efficient enough, to dislodge the more pricey oil-fired peaking plants that sell at more than Php8/kwh to the WESM. Should FGEN's strategy prove potent, Trans-Asia Oil and Energy (TA) which is heavy in peaking capacity with 150MW in Subic and Northern Luzon will likely be hit as well as Aboitiz Power's power barges that have figured in the alleged WESM price manipulation incident in 2013.

DNL's Php512m 1Q15 earnings, up 16% yearon- year (yoy), look like a slow start versus the full year 2015 consensus earnings forecast of Php2.4bn. But it is all because of seasonal factors according to management in a briefing this morning at Holiday Inn, Makati. 1Q is usually weak and the kick in earnings will be in the second semester.

Of the 31 listed companies that have so far released their 1Q15 earnings, only two were spectacularly pleasant surprises: Nickel Asia, +up 281% to Php676m and Security Bank's 132% to Php3.4bn. Overall, however, the results were preponderantly below expectations (17 companies) and the rest were either just aligned (such as BDO, +9%; ABS-CBN, +5.8% HOLCIM, -10%; MERALCO, +8%) or unimpressive such as 0 growth for MWC versus expectation of negative. RCB turned in a surprising 20%, tagged as an outperform by the lone research coverage of ATR Kim Eng.

Trans-Asia Petroleum (TAPET) - the oil and gas arm of Trans-Asia Oil and Energy Corp. (TA) - shot up 43% from opening of Php5.70/shr to Php8.20 (May 11). Philex Petroleum (PXP) - the oil and gas arm of Philex Mining Corp. - has also moved up significantly in May 11, up 46% to Php2.24/shr.These companies have no recent disclosures that might fuel a share price stock rally, but the confluence of two events appear to be pushing out the oil bears and the oil bulls back in the stock market.

Sans tariff increases in both water and toll road, MPI turned in 1Q15 earnings in line with our own expectation of Php10.6bn. Versus the consensus of Php9.3bn in 2015, the 1Q15 bottomline was an outperform. Meralco and Maynilad are now even at 38% share in terms of their earnings contribution to MPI, but Meralco's share will increase anew to reflect increased MPI ownership in it, up 5% to 32%. There are no plans in the near-term to increase said ownership further to 35%.

AP posted core net income of Php4.3bn in 1Q15, a decline of 1% compared to the same period in FY14. The decline was due to the following: (i) the expiration of SNAP-Magat's income tax holiday, which started on July 2014; (ii) decreasing steam flow from its Tiwi-Makban plants, resulting in lower energy sales for the period; and (iii) lower average selling prices on new ancillary contracts.

As political ad revenues start to trickle in, ABS sees earnings to reach Php2.4bn, a growth of 18% from FY14's Php2.0bn. In addition, the company has cost reduction programs with the completion of its five Hollywood-style soundstages in a 5-ha property in Bulacan this year (two in 1Q15). Majority of productions will be done in studios; thus, improving quality of content and cutting production costs by 65-75%. By end-FY16, the company expects to add five more soundstages.

Lafarge Republic, Inc. (LRI), formerly Republic Cement Corporation, was incorporated in May 3, 1955 to primarily engage in the manufacture, development, exploitation and sale of cement, marble and all other kinds and classes of building materials, and the processing or manufacture of materials for any industrial or commercial purpose. The company is one of the leading cement players in the Philippines with an estimated market share of 27% in the cement industry and a production capacity of 6.5 million tons per year. It is currently adding two new mills which will add 1.6 million tons per annum to its production capacity, these mills will be completed in 2015.

Weak trading at the secondary market was well within expectations. Cautious market ahead of the non-restricted trading was hinted by the results of April treasury auctions. Yields at auction converged to higher levels on lukewarm demand.

After exceeding its core income target of Php17.8bn last year, MER expects to grow energy sales by up to 4% this year. Note that energy sales for 1Q15 grew by 2.3% from the same period last year as it recorded 8,092GWh in 1Q15 (vs. 1Q14's 7,908GWh). Even though January energy sales (-0.5%) slumped due to the long holidays for the Papal visit (causing 75GWh of unrealized sales), February (3.7%) and March sales (3.4%) picked up due to increasing demand compared to last year.

Guaranteed returns on Philippine water concessions also known as Appropriate Discount Rate (ADR) - one of the four water tariff hike determinants - are hitting all time-lows. (The other three determinants deliberated during the arbitration and negotiated with MWSS by the water contractors Manila Water and Maynilad were opening cash position, future cashflows which include CAPEX, and corporate income taxes.) From an agreed post-tax ADR of 7.61% which MWC has negotiated with MWSS and approved by the latter, the Ayala-owned water utility will have to make do with a lower ADR of 5.53% post-arbitration.

As expected, secondary market trading was relatively shallow. Market participants were at the sidelines as the May 4 implementation of the non-restricted trading nears. Uncertainties surrounding the US rate hike schedule led to a wait-and-see market. Economic data from the United States remained mix and the Fed will hold its April meeting this week.

In early 2014 nickel prices surged on the back of the Indonesian nickel ore exports ban in its first year of implementation, part of a law which bans the export of unprocessed ores aimed at developing the mining industry by increasing the value added of its raw material exports. Around 22% of the global nickel supply (440k tons) was taken out of the global market as a result of the ban; huge as that shortfall is almost of half what China needs (975k tons) to produce 22.5m tons of SS. China is dependent on two big suppliers: Indonesia and the Philippines which in 2013 sold it 27m tons and 21m tons of nickel ore, almost 100% of China's 2013 full year imports of 49m tons.

Two miners are sharing their wits over a nickel project that should extend the life of one and enable the other to survive a market slump. Cash-rich NIKL, whose earnings reached an all-time high of Php8.5bn in 2014 from Php2.05bn in 2013, has found a mine life extender in Nihao's contractee Geogen Corp., buying it for Php720m. Geogen has the MPSA on a nickel mine in Dinapigue, Isabela (Isabela mine) that Nihao operates and which boasts of a JORC certified nickel ore reserves of 135m wet metric ton (WMT).

Bond market posted slight gains last week as march inflation (2.4%) beat forecast at around 2.5-2.6%. Gains were most evident at the front-end as benchmark short-term rates fell by an average of 12bps. Daily trade volume improved to Php14.4bn (10%, w-o-w).

For the first time in the past four Philippine election years of 2004, 2007, 2010, 2013, ABS-CBN made more money year-on year (yoy) in a post-election year such as last year (2014) when history dictates it should be less. That's why share prices were up 32% year-to-date to Php61.50, making the Lopez media company one of this year's top performing equities, ahead of GMA7's share price gain of 5.8% for the same period. ABS didn't only hit its profit guidance of Php2bn recurring earnings, up +42% yoy, it also bucked the historical earnings slumps (range of 20%-25% in 2011) that had usually bugged the year's operating results after elections. Recall that 2013 was a Congressional and local election year.

San Miguel Corp.'s (SMC) recurring net income rose more than two-fold, +244%, to Php27.9bn last year from Php8.1bn. That was on recurring basis. It didn't include Php40bn worth of gains on the Meralco share sale in 2013.

ST yields continue to rise amid selling behavior of foreign clients. Yields at the long-end moved sideways as domestic players remained defensive. The 10-yr rate was relatively unchanged at 4.165% while FXTN 10-59 mildly rose to 3.5305% (+2 bps, w-o-w). The market expects March inflation to be around 2.6-2.7%.

If there is any industry that comes next to the economy's fastest growing industry in 2014, it was one least expected, the Philippine health care services' growth of 19%. The fastest was the construction business' 25% growth, riding the property development upcycle. But the group of Metro Pacific Investments (MPI) had seen the health care industry's rich potentials early on and so had its hospital business centralize profits under Metro Pacific Hospitals Inc. with stockmarket listing ambition.

The Fed dropped the "patience" language but reiterate that the US economy's performance is still far from the Fed target. Yellen emphasized that the Fed is closely monitoring inflation. This slightly dovish Fed triggered buying for LT and ROP papers towards the end of last week.

Since Emperador (EMP) made only 5% in earnings growth last year to PHP6.1bn (a shortfall of -13% versus the 18% required to hit the 2017 Php11.3bn target of double the 2013 earnings of Php5.8bn), EMP will have to execute exceptionally well and deliver a lot this year. Company management retained its guidance of double the 2013 net income by 2017 through a marketing ramp-up of the Php32bn Whyte & Mackay (W & M) acquisition in May 2014.

Yields of peso and dollar government securities inched up as traders waited for this week's Fed meeting. Traders sentiment remained influenced by monetary policy abroad. Benchmark yields rose as much as 85 bps.

It used to be that the WESM was lucrative because it was unregulated and Trans-Asia (TA) - a major seller - was reaping a windfall like no other time in its history, achieving half a billion pesos net profits in 2013. With a regulated WESM, TA -- whose spot sales comprised the biggest portion of its total revenues since 2008 -- had to shift strategies. Note that electricity trading income accounted for 86% of TA's total revenues as of 9M14.

Local traders were once again at the sideline as they waited for the US labor market report for February while the PH 2.5% February inflation was in line with consensus estimates. This resulted in shallow trading (Php10bn/day vs prior week's Php21.5bn/day) and higher yields (+4.4 bps, w-o-w, ave). FXTN 10-59 (9.5-yr) ended at 3.5550%, up by 11 bps (w-o-w).

Trading rebounded and yields fell as dovish statement from Yellen eased traders nervousness on US Fed hike timetable. Domestic fundamentals that support low yields remained. BSP Gov. Tetangco said that Feb inflation could be at 2.2 to 3%.

2014 consensus earnings expected was Php1.8bn, but DNL turned in Php2.03bn, up 27% year-on-year (YoY) on pro-forma basis. This is on sheer volume expansion amid gross profit margin (GPM) compression, -1.3% to 15.9% groupwide, underscoring what we've always noted about DNL that it is not a margin play. GPM may shrink as it did last year because the sales mix was more of the low margin refined coconut oil (4% GPM) at 41% share of total revenues versus 33% a year ago; yet DNL can always produce better profit outcomes.

Metro Pacific Investments Corp. (MPI) could achieve growth of 20% in core net income this year after the strong results of 2014. Last year, earnings grew higher than guidance of Php8bn, 18% above 2013. This year, our estimate is core net profits of Php10bn even without the tariff hike of Maynilad.

Thin trading continued as both local and foreign investors remained defensive ahead of Yellen's testimony to Congress (February 24) and Fed meeting this March 19. Traders temporarily ignored domestic fundamentals pointing to low yields. Daily trade volume for last week was down by 30% to Php8.9bn and peso yields rose by an average of 29 bps.

The Cement Manufacturers Association of the Philippines (CeMAP) sees cement demand reaching 27.0mn MT by 2017, growing by a CAGR of 8.4% from 19.6mn MT in 2013. From 2003-2013, demand grew at a CAGR of 4.9%, while cement sales volume followed with a CAGR of 4.5% to 21.3mn MT in 2014. We therefore estimate cement sales to hover close to the same level as demand and to grow at a slightly lower CAGR of 8.2%, supported by the cement industry's 31% unutilized capacity.

Cautious trading of peso government securities led to mixed fixed income market earnings last week. The impact of the lower inflation expectation after the BSP cut its 2015 inflation projection from 3% to 2.3% was offset by the bullish global sentiment on the US recovery and US rate hike. This pushed traders to the sideline, which resulted in daily trade volume dropping 68% (w-o-w) to Php 12.8bn.

Phoenix Petroleum and Petron Corp. were among the top gainers on Feb. 4, up by +4.06% and +4.38% to Php4.11/shr and Php10.24, respectively. That was in sympathy with the global energy companies' stock rally on a likely oil price "normalization." The Dow Jones advanced 300 pts last night on that view, leading the PSEi today to a new high, closing +102.9 pts up to a record 7,716.

As investors took profit, prices of long-maturity peso and dollar PH bonds fell. Most LT ROPs, as well as the peso 10-yr rate, hit 1-yr low last Feb. 02 ahead of the release of the January inflation. The peso 10-yr rate was at 3.091% last Feb. 02 - a level that was difficult to maintain for a very long time.

PSEi closed again at a record high for the fifth week, gaining +1.87% to 7,728.18 on lower inflation rate recorded in January and better-than-expected corporate earnings. BSP reported a 2.4% inflation in January, down from December's 2.7%. Speculations stir that the central bank might lower the interest rate this year given the low inflation environment brought about by falling oil prices.

Share prices of mass housing developer 8990 Holdings (House) were up 30.3% year-to-date to Php9.28, above the PSEi's advance of 5.4% (Feb. 2, 2015). This is even with 2014 earnings undershooting the Php3.8bn consensus expectation. Investors were happy enough that management delivered on its 2014 profit guidance of Php3.3bn, a growth of 52% over 2013.

A hefty dividend yield of 4% is not so common in the gaming industry. But Belle did just that, giving out a special 18 centavos per share that may yet have a regular component which last year amounted to 2 centavos. Together with 78%-owned dividend paying Premium Leisure Corp. (PLC) that directly owns City of Dreams casino, Belle is doubling dividend opportunities for its shareholders helped by retained earnings of Php4.9bn, larger than PLC's Php1.1bn.

OPEC's failure to cut daily oil output of 30 million barrels per day (mn bbl/d) is leading to a free fall of global oil prices. United States benchmark WTI fell 52% since end-2013 and 56% down from its high of US$107.26/bbl in July 2014 to US$46.84/bbl. With aviation fuel as CEB's main expense (51% of 2013 operating expenses), we expect it to benefit from lower oil prices, with share prices up +17% since November 26.

A Swiss economic nightmare in the making? That's how the sudden Swiss central bank's (SNB) free float/abandonment of the 3-yr old Swiss Franc's cap/peg vs the EURO (EUR/CHF) at 1.2 came across the European markets late last week. SNB's move dragged the exchange value of the EUR to 0.8 for each Swiss franc (CHF) as the latter soared, affirming its safe-haven currency status.

Casual dining restaurant chain Max's Group, Inc. (MAXS) could be the next big gainer in the consumer counter. It actually is, already. The only question is how credible was the share price run. MAXS zoomed 55% to Php27.50/shr (today's close, Jan 12, 2014) since its last December's follow-on offer (FOO) worth Php3.5bn priced at Php17.75/shr. That offer price carried a PE of 20x, representing a net income objective of almost a billion pesos this year (Php976m) based on a market capitalization of Php19.5bn.

Guess what stocks will do better this year. Our stock picks have commonalities; they are cheap, got robust P & L prospects and growth stories to tell. But they also look like the same old set for 2014 -- power generation and consumer names that already had nice share price runs. Do their giddy heights mean the party fizzling is a certainty. We don't think so. In fact, there's only one worst regret that can happen by yearend 2015 and that is one might have bought so little of these names.

Philippine Stock Market 2015: A Fiscal Upside

December 15, 2014

For the entire 2014, Philippine economic growth may have missed a previously strong locomotive - fiscal spending - yet many bet GDP growth is likely still at 6%. Up to 2Q2014, government spending was stagnant and even contracted by -2.6% in 3Q. Disbursement bottlenecks were just too huge to battle; the DAP and the PDAF scandals.

PSEi fell on profit-taking

December 12, 2014

PSEi fell -0.09% to 7,224.21 on profit-taking. MPI fell -8.0% as Bases Conversion and Development Authority (BCDA) issue Swiss price challenge guidelines in connection with the Business and Operating Agreement executed between BCDA and Manila North Tollways Corp. (MNTC) over the SCTEX in July 2011. MNTC noted that since the price challenge was not contemplated in the BOA, it cannot be undertaken without MNTC's consent on its terms. The gaming components of PSEi fell -3.5% on China's anti-corruption drive and clampdown on Macau junkets.

Leisure and Resorts World Corp. & Warrant: Sell the option, buy the common

December 2, 2014

LR warrants have gone up 1,080% year-to-date (ytd) to Php5.90/shr. as of last December 2. The peak was Php6.88/shr last Nov. 21. At that level, the ytd price gain stood at a higher 1,276%.

Philippine Bond Market: Lower inflation outlook and early position ahead of 3QGDP release led to rally at the long end

November 21, 2014

Trading continued to deepen as daily trade volume reached Php47.07bn, up by 124.6% from the week prior. Trading depth was only seen at the belly and long end. As foreign investors remained cautious on the value of the peso, yields at the front-end rose by an average of 5.75 bps.

San Miguel Corporation: Earnings buoyed by core and growth businesses

November 17, 2014

SMC has had strong core operations in San Miguel Brewery, Ginebra and Purefoods with additional boost from Global Power. These four subsidiaries already accounted for Php41,6bn or 83.1% of the conglomerate's Php50.1bn income from operations in 9M2014.

We saw thin trading of ST papers as foreign investors remained cautious on peso further decelerating. Total trading of the said papers was only at Php7.4bn (-81% w-o-w), about 7% of the total traded peso debt securities. As for the long-end, buying appetite was again in the horizon as local investors took position ahead of the release of the 3Q2014 GDP result.

Last week's total trade was only at Php132bn (daily average @ Php26.4bn), 30% and 12% lower than the week prior (Php188bn) and October average (Php150.3bn), respectively. After the release of the October inflation number (@4.3%), total trade dropped to Php6bn (Nov 6). The market expected inflation to be at 4.2%. Towards the end of November, we expect the 3Q2014 GDP growth and 5-yr auction to give downward bias to yields.

DNL's profit outlook is even brighter next year on earnings growth momentum underpinned by new deals, the big one is the food ingredient supply agreement with US multinational Ventura Foods, the latter with sales of $10bn. The deal enables DNL's food ingredient technology to ride on Ventura's huge Asia Pacific clientele that includes Burger King and Subway, requiring DNL's inputs to food sauces and salad oils. The Ventura contract potential is huge.

Manila Electric Company: Earnings unexciting, but a dividend play

October 28, 2014

Core net income rose by 5.4% in 9M14 to PHP14.3bn (from PHP13.6bn in 9M13), while reported net income growth was better at 7%. Global Business Power contributed over PHP220mn in the same period. Electricity revenues declined by 3.1% in 9M14 to PHP199.0bn (from PHP205.3bn in 9M13) due to the adjustments in the WESM prices for the month of December 2013, among others. On the other hand, non-electricity revenues improved by 37.1% to PHP3.8bn in 9M14 (from PHP2.8bn in 9M13) mainly driven by the increase in volume of bills payments of CIS Bayad Center.

Philippine Bond Market: 3-yr paper sold at premium

October 24, 2014

Tight trading was seen in the peso fixed income market, as the daily trade volume fell to Php12.9bn from Php29.9bn the week prior. Forward looking market already priced in the pause in the contractionary move of the BSP the week prio when yields dropped by an average of 3.7 bps. Last week, yields dropped by an average of 1.4 bps.

Philippine Balance of Payments: First year in the red since 2009

October 24, 2014

In 9mo14, the Philippine balance of payments (BOP) deficit stood at -$3.43bn. That's $710m less than the deficit of -$4.14bn in 1H2014, yet hardly a consolation. The deficit was there even with the outperformance of one major account: the 7-month (Jan-July 2014) +$4.0bn Foreign Direct Investments (FDI), already 1.54x the 2014 target of $2.6bn and 8% above last year's $3.7bn, same period.

Peso and dollar GS rates dropped amid heightened concern over global economic growth prospects and easing inflation fears in the Philippines. Demand for long-dated peso GS persisted with initial indicators pointing to the Monetary Board (MB) delaying its next contractionary move to 2015. The peso GS was on a three-week rally, with yields dropping by an average of 3.7 bps and daily trade volume near Php30bn.

PSEi resilient amid jitters & debt risk

October 17, 2014

The strength of the Philippine macroeconomy is being tested in the equities markets and so far the PSEi is robust, hovering around 7,000, a key support. Even with the unexpected 400 point plunge of Wall St last Tuesday and continuing weakness, the local stock market yesterday saw property companies, (seen to reap the most from lower cost of money), being picked up anew by bargain hunters.

Fear is back; Flight to quality assets is on

October 16, 2014

Fear is back in the market and flight to safety is ruling the day. The US fear gauge VIX lately was up, +15% to 26.25, highest for the year. And investible money flowed lopsidedly into 10yr UST, whose yield slipped, hitting a low of 1.9% yesterday from previously 2.2.%. 10 yr USTs are still the cheapest high quality sovereign bonds at 2.15% being bought by Japanese and European investors, according to Bloomberg.

Philippine Strategy: PSEi's 7,000 key support breaks down

October 14, 2014

Philippine Stock Exchange, the benchmark index sank 199.26 points, or 2.78 percent yesterday, to close at 6,968.09, its lowest finish since ending at 6,956.66 on August 11. All counters lost at least 1.40 percent.

PSEi on IMF global growth downgrade

October 10, 2014

PSEi fell -1.09% to 7,167.35 following a heavy net foreign selling amounting to Php8.48bn, the biggest weekly outflow for the year. For nine consecutive days, foreigners were net seller. SM, AC and TEL were the top stocks sold by foreigners for an aggregate amount of PHP1.8bn.

PSEi fell on telcos sell-off

October 3, 2014

PSEi fell 14.27pts or -0.20% to 7,247.03 following the sell-off in PLDT and Globe as they rolled out promos to corner a bigger market share. PLDT announced a free mobile internet for its subscribers up to January 5, 2015. In response, Globe brought back their free Facebook promo from October 3-5.

Weekly Equities Summary

September 26, 2014

PSEi fell 26pts or -0.35% to 7,261.30. Key events during the week were the sale of GSIS's lots in Bonifacio Global City (BGC) and Travellers International Hotel Group's (RWM) plan with Resorts World Bayshore.

Given that it has the biggest landbank in Fort Bonifacio, (105 hectares at an average acquisition price of Php30k sqm), Megaworld is the biggest beneficiary of the outrageously high but winning bids of Goldenwill for the GSIS property (developed land, lots 1 and 2) totalling 1,600 sqm meters lot each worth Php458k per sqm and Php500k per sqm,the latter is the winning bid of Focus Palantir.

PSEi rose on US Fed's rate hike postponement

September 18, 2014

PSEi rose by 85pts or +1.19% to 7,287.29 on US Federal Reserve's pledge for conditional low rates. The Federal Open Market Committee is weighing policy normalization plans (rate hike and reduction of securities holdings) should economic conditions warrant a less accommodative monetary policy. The Fed intends to cease their bond buying by October 2014 and its statement read the Fed will give "considerable time" before increasing the federal funds rate.

Shareholders of Sinophil Corp. or Philippine Leisure Corp. (PLC) are seen to pay in full or 75% (Php1.05/shr) of the Sino shares subcription payable (shares long issued to stockholders at Php1.40/shr in the mid-nineties but paid only at 25%, a level compliant with SEC and PSE rules).

PSEi inched down on key policy, SDA rates hike

September 12, 2014

PSEi declined by 61.7pts or -0.85% to 7,201.88 on well anticipated policy rate hikes. BSP hiked the reverse repo and repo rates to 4.0% and 6.0%, respectively, after the 25 bps upward adjustment in July. The central bank also hiked the SDA rate by 25 bps to 2.5% after it was increased by the same amount in June.

PSEi rose 213pts or +3.02% to a year-to-date high of 7,263 on better than expected inflation results. The country registered an inflation rate of 4.9% in August, lower than market consensus of 5% and within BSP's forecast range of 4.7-5.5% for the month. However, core inflation rose from 3.05% to 3.4%.

Buying driven by foreign client appetite and favorable August inflation (4.9% vs 5.0% consensus expectation) was only concentrated at the front-end. ST yields dropped by an average of 2.3 bps and total value of traded papers with less than 2 years maturity reached Php32.38bn, 53% higher than the previous week. We saw cautious trading of MT and LT papers ahead of the Monetary Board meeting (Sept. 11).

Nickel Asia Corporation: HPAL and Indonesia’s ore ban drive growth

September 5, 2014

NIKL share prices have had the most spectacular run this year, rising 210% year-to-date to yesterday's close of Php46.50. The questionis whether it still has further to run? This is a fundamentally grounded rally with the 2nd nickel processing plant (Taganito HPAL) bearing its first full year of operation on the bottom line at this time (HPAL 2 was commissioned 4Q13)

Trans Asia Oil and Energy Development Corp. (TA) has spun off its oil and gas business, now called and listed by way of introduuction, TA Petroleum Corp. (TAPET), which holds four oil and gas service contracts in Palawan and Visayas, none of theem oil producing, but one with proven oil and gas reserves of 263m barrels. The latter is service contract 51 (Duhat) located in Eastern Visayas, where the spun-off company owns a 6.67% interest. Operator of SC 51 is Otto Energy.

PSEi fell on final date of MSCI rebalancing

August 29, 2014

PSei fell 82.5pts or -1.15% to 7,050 on MSCI rebalancing final date, leading the index lower towards the end of the week. Recall that TEL, ALI, AC, BDO, MPI and EDC saw an increase in MSCI weightings. Net foreign buying surged to PHP8.25bn led by TEL (PHP8bn), ALI (PHP838mn) and EDC (PHP523mn), while net foreign selling was led by AGI (PHP1.11bn), PCOR (PHP332mn) and MBT (PHP242mn).

Philippine Strategy: Distrusting the Aging Bull

August 26, 2014

The BSP has played the interest rate corridor as a preemptive strike against inflation targeted at 3%-5% this year and next year at 2%-4%. Inflation soared to its fastest since 2011, registering at a high 4.9% last July. Rising interest rates and surging inflation are the usual events that damp stock market rallies and in severe cases of monetary tightening and hyperinflation preceded the emergence of a bear market.

We saw shallow secondary market, as average daily volume dropped to Php5.8bn, 47.9% lower than the previous week. Yields inched up by an average of only 2.05 bps (w-o-w). The USD-denominated market was at 2-week rally, as confidence towards global economic recovery softened. Philip 4.2 2014 shed 10.4 bps to 3.353%.

San Miguel Corporation (SMC): Trading Buy on Recovery Story

August 22, 2014

SMC's 1H2014 operatin fresults (year-on-year) saw big improvements in loss making subsidiaries and huge leaps in operating incomes, except the beer businesss, which remained flat, -4% to Php10.2bn on 1% growth in beer volume. 1H2014 core net income rose 13% to Php15.7bn, while net income attributable to equityholders advanced 601% to Php12bn. EBITDA rose 11% to Php45.3bn, which when annualized points to a potential highest (full year basis this year) in the last three years amounting to Php90.6bn versus the company's own forecast of just Php74bn, flat vs. 2013.

PSEi rose on MSCI rebalancing momentum

August 22, 2014

PSEi rose 125pts or 1.78% to 7,133 as the buying momentum continued during the week following the MSCI rebalancing led by TEL (+1.5% WoW to PHP3,300), AC (+3.1% WoW to PHP725), ALI (+3.1% WoW to PHP33) and EDC (+11% WoW to PHP7.15). AGI, LTG and PGOLD were heavily sold during the week after reporting weaker earnings results. AGI fell -3.8% WoW as it reported a net income of PHP7.49bn in 1H14, 9% lower year-on-year dragged by RWM and EMP's earnings.

As the bond swap offer period ended (Aug 15), the 10- and 1-yr spread dropped to 217.5 bps (-7.5 bps). The 10-yr rate went back to near 4.0%-level after reaching 3-month peak of 4.125% (Aug 8). Poor economic data from advance economies that showed shaky recovery drove the rally in the USD-denominated debt market.

PSEi rose 128pts or 1.86% to 7,008 following the expected increase in MSCI weightings of TEL (+8.3% WoW), AC (+6.4% WoW), ALI (+4.2% WoW), BDO (+0.9% WoW), EDC (+3.5% WoW), and MPI (+3.4% WoW). Majority of companies reported better earnings during the first half save for PGOLD (1H14 net income down 6.2% to PHP1.66bn) and LTG (1H14 net income down 69% to PHP2.16bn). PGOLD attributes the decline with lower sales volumes brought about by non-food items which becam expensive due to sin tax law.

MBT, BDO and BPI: Who’s got the fastest buck?

August 14, 2014

The Hawk is Watching. Is the hawk in BSP pushing the panic button on a perceived property bubble earlier than needed? The BSP has hiked the policy, overnight, SDA rates and bank reserves. Markets got the message; the peso yield curve was up almost 100 bps across tenors on average since last yearend and that could damp rising inflation but not potential excesses in property lending, whose growth surpassed that of the overall bank loans.

Manila Water Company Inc. (MWC): Share prices soar on strong 1H2014 income and attractive valuation; Snub deadweight of arbitration

August 11, 2014

Earnings Above Expectations. East Zone water utility concessionaire Manila Water’s (MWC) operating results are looking up even under the weight of an arbitration proceeding involving the rate rebasing scheme (tariff increase or reduction) that threatens to put profit targets off track.

The tax factor. Pagbilao paid Php1.8bn in income taxes upon expiry of its four-year tax holiday this year. That was the biggest single hit on AP’s core earnings, on a slide since 1Q14 and dropping 21% in 1H2014 to Php8.3b, year-on-year (yoy). AP blamed the low water levels of the hydros and weak ancillary market for the drop in income.

PSEi fell on inflation concerns; World Bank growth downgrade

August 8, 2014

PSEi fell 13.89pts or -0.20% to 6,880 as inflation accelerated to 4.9% in July from 4.4% during the previous month, higher than the 4.6% consensus. YTD inflation is at 4.3%, reaching the top range of BSP’s forecast (3-5% for the year). World Bank downgraded its growth forecast for Philippines to 6.4% for this year and 6.7% in 2015 from 6.6% and 6.9%, respectively, citing weaker government spending.

Bond exchange temporarily triggered short duration strategy

August 8, 2014

The fixed income market quickly recovered from the higher-thanexpected July inflation of 4.9% (market expectation @ 4.6%). Aug 5, PDST-R2 rates dropped by an average of 1.83 bps (d-o-d basis). The announcement of the bond exchange program (Aug 6) triggered short duration strategy.

Robust 1H14 earnings result. CIC reported +41% growth in its 1H14 net income amounting to PHP577.34mn (headline) on the back of revenue improvement of +28% to PHP4.82bn. This translates to net income attributable to equity holders of Php346mn, up +45% year-on-year. 2Q14 net income (headline) grew +43% to PHP362mn from last year’s Php253m backed by sales growth of +20% to Php2.6bn. The result highlights the beneficial incremental income of newly acquired firms, Otis E&M Philippines, Inc. (Otis) and Concepcion Midea, Inc. (CMI).

D&L Industries, Inc.: High-margin specialty products drive revenue

August 8, 2014

Pleasant earnings surprise. 1H14 net income rose +22% to Php799mn, way above the 15%-20% full year profit guidance given early in the year. 2Q14 earnings of Php422m accelerated by +24% year-on-year and +12% quarter-on-quarter. Full year, maximum earnings growth potential has been revised upward, a high 25% and the minimum close to 20%.

Philippine Cement Industry: Lagging behind a robust economy

August 7, 2014

The Philippine government plans to spend PHP404.3bn on infrastructure projects in 2014, 37% higher than the amount spent in 2013. This will bring infrastructure spending to 3.1% of GDP from 2.5%. The government aims to increase this to 5.1% by 2016. The program is supportive of the cement industry demand.

As we predicted in our previous report titled, “Metro Pacific boosts Meralco Dividend Grab and Control” last June, Meralco increased its dividend payout for the year 2013 with cash paid out this year totalling 80% of the 2013 core net income from 70%. This is a one-shot event (a special cash dividend of 10% on 2013 core earnings) that does not alter the existing payout policy of 70% (50% regular and 20% on look back) of previous year's core net income.

Oriental Peninsula Resources Group, Inc. opens a third mine and closes Php5bn funding for 21MW run of River Hydro Power Generation

July 31, 2014

Oriental Peninsula is opening a third mine pit in Palawan with potentially 3x the nickel ore reserve size of the existing 2,000 hectare nickel mines in the municipalities of Narra and Espanola , 100km south of Puerto Princesa City with two ports facing the Sulu Sea. ORE's nickel ore resource and reserve were estimated in 2010 at 54m dry metric ton (DMT) and 23m DMT, respectively, in the existing two mines.

Banking Industry: Opening up wider

July 21, 2014

Executive Summary :M&A Gets a Boost from Bank Liberalization II. Bank share prices were the slowest to recover from their last year’s trough to this year’s highs. That’s after pricing in sharply lower expected 2014 earnings. In 1Q2014, the aggregate trading gains of banks on both investment securities and foreign exchange plummeted 85.6% to a measly Php5.8bn versus last year’s Php40.2bn.

PSEi fell on profit-taking; Portugal concern

July 11, 2014

PSEi fell 61pts or -0.88% to 6,901.09 on technical correction. Intra-day high of above 7,000 on Monday signalled profit-taking for investors as the index reached its psychological resistance coupled with the approaching “ghost month”. Total value turnover amounted to PHP42.37bn with net foreign buying of PHP889mn. This accounted for 55% of the total value turnover.

MPI is partaking of the expected higher dividend payout from Meralco, which after the Performance Base Rate System (PBR- Meralco’s tariff setting framework with the Dept of Energy) is set to rise. Although there’s been no formal word on just how much dividends are rising, MPI President Joey Lim hinted to us it is in the horizon. Right now the policy is 50% of the previous year’s earnings with look back of up to 20%. Last year, Meralco’s cash dividends amounted close to Php12bn, half of which went to Beacon.

Last week, investors became highly cautious in anticipation of the inflation report. This resulted in yields inching up by an average of 4.36 bps, week on-week. July 4, the announced June inflation of 4.4% (4.6% consensus) surprised the market. The same day, we saw market participants lengthening duration via selling short-term papers and buying long-term papers. This week, the Treasury will auction t-bills.

PSEi rose to its highest close since June 2013 on lower-than-expected inflation

July 4, 2014

PSEi rose 120pts or +1.76% to 6,962.28, the highest close since June 3, 2013 as inflation slowed to 4.4% during the previous month from 4.5% recorded in May. This is below the consensus of 4.6% and within the BSP’s forecast range of 4.1-5.0% for the month. Major contributors to the increase are food and non-alcoholic drinks index (7.4% from 6.7%), furnishing and household equipment index (2.6% from 2.5%) and education (5.0% from 4.7%).

Philippine Bond Market: Poised to post gains in the next few weeks

June 27, 2014

The market posted treasury gains this week, resulting in yield drops by an average of 4.3 bps. The market also deepened, as daily volume increased to Php 15.76 bn, a 8.39% growth from last week. The increase in demand came from off-shore and corporate clients. The 25 bps increase in the SDA rate only made a momentary upward pressure to yields.

PSEi rose on end-of-quarter window dressing

June 27, 2014

PSEi rose 111pts or +1.65% to 6,842.15 in anticipation of end-ofquarter window dressing. Total turnover amounted to PHP52.55bn. It has been on a weekly net foreign buying streak from Feb 21 to May 23, then fell to a net foreign selling thereafter for two weeks (May 26 to June 6).

PSEi fell despite BSP's lower than expected tightening

June 20, 2014

PSEi fell -0.80% to 6,730.96. Total turnover amounted to PHP64bn, with a net foreign selling of PHP3.08bn. Foreign transactions accounted for 38% of the total turnover. PSEi has been on a weekly net foreign buying streak from Feb 21 to May 23, then went on a net foreign selling thereafter for two weeks (May 26 to June 6). It went back on a net foreign buying on June 9-13 but reversed to a net foreign selling last week (June 16-20).

Petron Corporation (PCOR): Wider Margins on Crude and Pump Prices

June 18, 2014

Three events are conspiring to catalyse a possible revival of PCOR share prices from where it is now; one of PSEi’s laggards with year-to-date price change of -15.19% (as of June 13, 2014).

Double-digit growth in earnings. After achieving an 11% growth in earnings in 1Q14, VLL estimates to post a double-digit growth this year. Recall that earnings in the first quarter reached PHP1.5bn (from last year’s PHP1.3bn). Based on earnings consensus, 2014 earnings may reach PHP5.8bn, a 14% increase from last year’s PHP5.1bn.

PSEi rose despite World Bank's growth downgrade

June 13, 2014

PSEi rose 22.33pts or +0.33% to 6,784.95. Total turnover amounted to PHP 29.59bn, posting a net foreign buying of PHP3.08bn. This is the first recorded net foreign buying after two weeks. PSEi was on a weekly net foreign buying streak from Feb 21 to May 23. Foreign transactions accounted for 49% of the total turnover. World Bank downgraded the country’s growth estimate from 6.7% to 6.6%, taking into consideration the negative impact of typhoon Yolanda in the economy. Growth forecast for 2015 and 2016 was revised to 6.9% and 6.5%, respectively, citing the speed and scope of post-Yolanda reconstruction program as key challenge to the growth.

Melco Crown's Execution Risk and Belle Corp.'s Cashflow Perpetuity in City of Dreams

June 11, 2014

City of Dreams (COD)’s casino operator and gaming partner of SM Group’s Belle Corp. Melco Crown (Philippines) Resorts Corp. made a bold prediction that should make it and Belle the top choice out of the emerging three-way fight in big time Phil gaming business, requiring a minimum $1bn investment in integrated casino and resort hotel projects.

ASEAN Economic Community (AEC): No “Big Bang” in 2015

June 9, 2014

The dynamism of ASEAN is raising its global profile. It has become a key manufacturing and trade hub -- in fact the world’s biggest exporter of electronics, milled rice, one-ton pick up trucks, frozen prawns and the second biggest in garment shipments. Intra-ASEAN trade share grew from 17.0% in 1990 (pre-AFTA) to 25.0% in 2011, turning it into the fourth largest exporting region in the world. The emergence of a regional production network or a regional value chain has made this possible.

PSEi rose on ECB rate cut; US markets all-time high

June 6, 2014

PSEi rose 114.97 or +1.73% to 6,762.62, tracking US markets and ECB’s stimulus plan. S&P 500 and Dow close to an all-time high on Thursday at 1,940.46 and 16,836.11 respectively on European Central Bank’s (ECB) aggressive stance to fight deflation. ECB cuts its lending rates from 0.25% to 0.15% as the Euro zone recorded an inflation of "below but close to 2%".

Profit-taking was seen in the belly and the long-end, while the short-term rates followed downward leads from the result of the previous auction of Treasury bills. Liquidity was tighter this week, as daily volume was only at Php 13.43 bn, 46.7% lower than the daily volume last week (Php 25.2 bn) ahead of the May inflation data. On one note, this figure is still healthier than April’s daily trading volume at Php 8.38 bn. Above consensus expectation May inflation of 4.5% and hawkish comments (narrowing room for steady policy rates) from the BSP led to yields, except front-end, inching up by an average of 2.73 bps.

Sinophil Corp. (or Sino and to be named Premium Leisure Corp-PLC) will be the SM Group’s pure gaming venture. Sino shares shot up 48% in today’s morning trade (June 3, 2014) to Php0.54, touching a ceiling when news of Belle Corp.’s (Bel) gaming asset injection into Sino hit today’s headlines. Sino’s last traded price of Php0.29/ shr. was last Thursday.

1Q14GDP: A Quarter to Forget and a Template for 2014

June 2, 2014

After the big “Ouch” on the GDP’s worse-than- consensus result of 5.7% for 1Q14 that nudged down the PSEi 2.4% weekon- week but tempered by the MSCI semi-annual rebalancing, Philippine growth estimates for full year 2014 are on the downhill by consensus, lower by a minimum of 2% and maximum of 5% from previous forecasts.

Philippine Economy: GDP slowest in 9 qtrs at 5.7% in 1Q14

May 30, 2014

Key culprits in the slowdown is the weaker investments/capital formation account, down sharply to 7.7% from 49.8%. Capital formation is 20% of GDP and the trend underscores the sluggish PPP and weak FDI inflow, which we note to have dropped 24.7% in 1Q14. There is also the the slowdown in gov’t consumption to 2% from 10% a year ago.

Philippine Bond Market: Buying extended to 4th Week of May, profit-taking in next few days

May 30, 2014

Domestic fixed-income market rallied to its fourth straight week, after a very quiet April. The extension of strong risk appetite for bonds towards month-end was attributed to the worse-than-expected 1Q GDP figure of 5.7% versus 6.4% and money supply growth for April slowing down to 32.1% from 34.7% in March. Volume was primarily driven by strong corporate demand. Buying generally drove the Philippine GS market, pressuring down yields to lose an average of 4.9 bps.

PSEi fell as GDP fell below estimates

May 30, 2014

PSEi fell 163.68 pts or -2.4% to 6,647.65 as the 1Q14 GDP result of 5.7% fell short on consensus of 6.4%. Nevertheless, BSP Governor Amando Tetangco is still optimistic that the country will reach its growth target of 6.5% to 7.5%. MSCI semi-annual rebalancing became effective on Friday, adding MEG and excluding AP in the index.

Philippine Property Sector: Where are we in the cycle?

May 27, 2014

Global real estate money is pouring into the world’s top 30 cities and Makati City counts among the areas where investors have made money, reflected in the 15% capital value appreciation last year. Commercial land values in the Philippines business districts have risen by as much as 37% last year, specifically in Ortigas and Arca South (FTI property of Ayala Land). Still, the country is a far cry from the so-called super cities of the world such as New York, London, Tokyo, Paris and Hong Kong that have individually attracted more than USD30bn in investments last year to 1Q14. There were a total of 30 cities worldwide that accounted for nearly half of global commercial real estate investments.

First Philippine Holdings Corp. (FPH) sees Php4bn in earnings this year up +73% vs. 2013

May 26, 2014

FPH, the holding company of the Lopez family-owned energy and real estate ventures, sees Php4bn in earnings to common this year, powered by the earlier-than-scheduled recovery of FGEN’s damaged power generation assets: fire incident at Unit 60 of the 150MW geothermal unit San Lorenzo; shutdown of Bacman 1 and 2 (55MW each); and devastation of the 700MW Unified Leyte. FPH owns two thirds of FGEN and is its biggest asset. FGEN, in turn, owns 50% of Energy Dev’t Corp. whose Unified Leyte was reduced to zero post Yolanda but about 540MW of which are already up and running five months ahead of schedule or since November of last year.

Philippine Mining Report: Is recovery sustainable?

May 20, 2014

Mining stock prices have risen since the beginningof the year in step with the main market index. The mining index outperformed the PSEi, rising 37% versus 17% as of year-to-date May 19, 2014. Surprisingly, the leaders were the past years’ laggards. Both Century Peak Metals (CPM) and Nihao Mineral Resources (NI) jumped 90% and 94% each to PHP0.97 and PHP3.05, respectively, from year-end 2013 close of Php0.50 and PHP1.57.

Emperador Inc. (EMP): Acquisition of Scotch Whisky Giant Whyte and Mackay is key to doubling of income in 2017

May 16, 2014

Emperador sees doubling of net income in 2017 with the acquisition of 100% of one of the world’s fastest growing and one of five biggest Scotch whisky manufacturers Whyte and Mackay based in Glasgow Scotland. Its brands include Dalmore, Jura, Whyte & Mackay, Glayva and Vladivar (premium and super premium brands) and competes with well-known Thai and Indian Scotch whisky brands.

A tax holiday expiring for Pagbilao, Aboitiz Power Corp’s (AP) 700MW coal-fired cash cow, generally lower selling prices both bilateral and spot, higher steam cost squeezing margins at the 600MW geothermal unit and low water level at Magat close to the rule curve. These are just some of AEV’s challenges in its power utility AP that helped shrank the genco’s core net income by 3% to Php4.4bn.

With the Fed taper and rising interest rates, the days of Treasury bonanzas have slipped away. There is no question bank earnings are likely to fall this year than rise as they did last year in a big way; led by Metrobank which topped the other nine listed banks in terms of non-interest income (NII) worth Php39.5bn, followed by BDO and BPI.

SM started in 2H2013 an American Depositary Receipt (ADR) level 1 program that gives foreign investors exposure to the conglomerate whose core business include banking, property development and retail. The buying window should improve stock liquidity via 1 ADR for two common shares of SM. Another factor that should drive SM share prices is the foreign ownership headroom of 4% from the current 36% vs 40% limit.

Trans-Asia Oil and Energy Development Corporation (TA): Long in the Market, Short in Supply

April 1, 2014

TA may have one of the smallest power generating capacities among listed power companies (260MW), yet it was one of the few that saw robust earnings last year, +20% yoy to Php573m in 2013 on higher sales volume of 1,597GWh, a level 2.8x that of 2012 and powered mainly by profitable WESM sales. Its management attributed the income feat not so much to the spike in the spot prices as to its business model that’s long in the market (geared to WESM sales/electricity trading) and short in supply (contracted power generating capacity).

MPI’s 2013 core net income, up +10% to Php7.2bn, was within guidance of Php7.0bn-7.5bn. Dividends rose 16% to 3.70 centavos per share. Its hospital and toll road were the income boosters with core net income growth of +22% to Php879m and +25% to Php1.9bn, respectively. Maynilad had a surprising 11% core net income growth to Php7.5bn even on low 4% growth in billed volume to 1.129mcm and delayed tariff hikes.

AC Energy to power Ayala Corp's NAV

March 18, 2014

Holding firm Ayala Corporation (AC) is increasingly a power sector play. It announced $800m worth of investments in power generation to raise current attributable 324MW portfolio to 1,000MW by 2016 (992MW to be exact) by three more deals in the pipeline.

Manila Electric Company (MER): Meralco sees 4% sales growth

March 18, 2014

Pres. Oscar Lopez told FMIC Research 4% could be the likely 2014 energy sales. The same growth level was achieved for 2013 to 34,084k GWh, lower than the 7% in 2012, even with GDP growth hitting 7.2% last year. Sales growth produced 10% growth in distribution revenues to Php56.1bn on average tariff of Php1.65/kwh in 2013.

AEV’s core net income fell 10% yoy in 2013 to Php21.0bn, reflecting the weakness of the power business, hit by Php2.4bn replacement power losses of Aboitiz Power Corp.’s Pagbilao, flat volume and weak selling prices. The impact of the power business was so huge, it muted Union Bank’s 19% rise in earnings to Php9.0bn, driven by the 17% growth in non-interest income to Php11.3bn.

D&L Industries, Inc. (DNL): Outperforming Expectations

March 4, 2014

2013 was a stellar year for D&L Industries (DNL). The company posted net income of PHP1,402 mn, slightly above their PHP1,380 mn target. This was brought about by their shift in focus to a higher-margin product mix, as well as a 30% increase in the earnings of affiliate Chemrez Technologies (COAT).

Argentina Market: Can a serial defaulter get back to groove?

February 17, 2014

Once the world’s seventh richest country, Argentina has been tagged a serial defaulter; seven times it did with creditors since its independence from Spain in 1816. Also, it is now a top symbol of growing emerging market (EM) risk, after defying a US court order to pay $1.4bn to a group of holdout creditors that refused a debt exchange deal in 05 and 2010, entailing a haircut of 70% on Argentina bondholdings.

D&L: Quality over Quantity

September 2, 2013

Despite a 17% decrease in revenues for the first six months of 2013 (from P5.97bn to P4.94bn), D&L managed to grow its net income by 16% to P655mn from P565mn. The drop in revenues was mainly due to lower sales volumes, both on an aggregate basis and on the more significant product lines such as specialty food ingredients, which make up 71% of topline and plastics, with a share of 24% of the same. There was also the factor of lower commodity prices, led by refined coconut oil, 9% lower year-on-year.

Philippine Mining Report

January 30, 2013

Base metal prices are seen to rise 9% in 2013 on two key drivers: modest recovery in the European economy and $150bn stimulus-led investments in China, according to a Bloomberg survey poll of foreign research houses/banks that included Deutsche Bank, Credit Lyonnaise, Societe Generale. This view is predicated on global economic growth picking up at a likely 1.6%- to 3.6% this year, driving up metal demand. Some see copper leading, with prices up 12% on tight supplies from project delays based on a report by Scotiabank, noting these are in Peru and Chile, which comprised 40 percent of the world's copper supply.

Mining Blues will Blow Over

September 10, 2012

Philippine mining shares outshone all sectors in 2011, up 97%, but unraveled in 2Q & 3Q 2012. That left out a measly 4% gain for the sector as of early Sept. 2012 from peak 60% gain four months into 2012. Two unfortunate events were behind it: a recent policy freezing new Philippine mining contracts damping investors' zeal and waning China's appetite for metal due to a deepening economic slowdown. If these events were to reverse, will the plight of Philippine mining blow over?

Agriculture

August 30, 2010

After the energy crisis, economists warned that the next global crises would be on food and water. The crises will be driven by the growth in the world’s population and dietary changes in developing countries as their income increases. The United Nations estimates that by 2050, the world’s population will reach 9.1 billion, 34% higher than the current level. In order to feed this larger as well as richer population, the Food and Agriculture Organization (FAO) noted that overall food production must increase by 70%. In developing economies, food production would need to almost double. This implies significant increases in the production of key agricultural outputs.

Real Estate Investment Trusts: Is the Philippine Ready for it?

May 31, 2010

The Asian REIT market has been growing exponentially since it was first introduced in the region in 2001. From merely $2 billion, the Asian REIT market capitalization has grown to a whopping $65 billion as of December 2009.

Harnessing the Potential of the Philippine Renewable Energy

March 1, 2010

In the Philippines, the implementation of the Renewable Energy Act of 2008 is expected to renew interest in the renewable energy sector. The Department of Energy expects renewable energy power to double in the next ten years and to bring in as much as $27B in new investments in the next 20 years.

There is Opportunity in Pre-Needs

August 31, 2009

Since its establishment in the 1960s, the pre-need industry has grown into a multi-billion peso industry and has contributed significantly to the growth of the financial sector. As of SEC 2007 Annual Report, total trust fund of the industry is P107 billion, this is approximately 7-8% of the total banking system’s trust and other fiduciary accounts. It also brings in much needed funds to the national government as 71% of the trust fund is invested in GS.

Business Process Outsourcing: Breaking New Grounds

June 30, 2009

While many industries struggle to cope with the effects of the global economic crisis, the Philippines’ business process outsourcing (BPO) industry posted staggering revenue growth in 2008. Last year, the sector reported a 26% surge in earnings to $6 billion from $4.9 billion in 2007. Sixty-five percent of the revenues were contributed by its voice segment or call centers while non-voice segment such as back office operations added 17%.